Correlation Between PGIM ETF and First Trust

Can any of the company-specific risk be diversified away by investing in both PGIM ETF and First Trust at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PGIM ETF and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PGIM ETF Trust and First Trust Senior, you can compare the effects of market volatilities on PGIM ETF and First Trust and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PGIM ETF with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM ETF and First Trust.

Diversification Opportunities for PGIM ETF and First Trust

0.66

Correlation Coefficient

PGIM ETF  First Trust

Poor diversification

The 3 months correlation between PGIM and First is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PGIM ETF Trust and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and PGIM ETF is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PGIM ETF Trust are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of PGIM ETF i.e., PGIM ETF and First Trust go up and down completely randomly.

Pair Corralation between PGIM ETF and First Trust

Given the investment horizon of 90 days PGIM ETF is expected to generate 1.46 times less return on investment than First Trust. In addition to that, PGIM ETF is 2.27 times more volatile than First Trust Senior. It trades about 0.04 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.14 per unit of volatility. If you would invest  4,548  in First Trust Senior on December 28, 2024 and sell it today you would earn a total of  27.00  from holding First Trust Senior or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PGIM ETF Trust  vs.  First Trust Senior

PGIM ETF Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM ETF Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, PGIM ETF is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

First Trust Senior

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PGIM ETF and First Trust

The main advantage of trading using opposite PGIM ETF and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM ETF position performs unexpectedly, First Trust can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Trust will offset losses from the drop in First Trust's long position.

The idea behind PGIM ETF Trust and First Trust Senior pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.